Deficit hawks vs. deficit frauds

By
Ezra Klein

I wouldn't blame the current spasm of misguided concern about short-term deficits on money that Pete Peterson and others have pumped into the deficit issue. As far as I can tell, Washington's serious deficit hawks have made a real effort to distinguish short-term deficits from long-term deficits. David Walker, perhaps Peterson's most important apostle on this earth, co-wrote a lions-laying-with-lambs op-ed with EPI's Larry Mishel in which they jointly argued that a "focus on jobs now is consistent with addressing our deficit problems ahead."

And Walker isn't alone. The Bipartisan Policy Center's debt-reduction commission paired their deficit plan with a proposal for more short-term stimulus. The idea that we can either focus on jobs now or deficits now is "a false choice," they said. That shamed the Simpson-Bowles Commission into adopting their stimulus proposal.

There are other examples, too, but those should suffice. There has been a genuine campaign on the part of people who are concerned about the economy to explain that the dangers of debt are longer term, while the pain of joblessness is happening right now.

The deficit hawks, however, often get blamed for the actions and rhetoric of the deficit frauds. The deficit frauds are the folks who use deficits for short-term political gain: This year, they've mainly been Republicans who opposed unemployment benefits because they'd add $56 billion to the deficit but demanded tax cuts that would add $4 trillion to the deficit. And they've been empowered not by Peterson's money or even the climate in Washington, but by the fact that people get very anxious about the deficit when the economy slows, as it's a number that they think helps explain the economic problems even as it mainly tracks them, and because a misplaced analogy to the European debt crises has made our deficit look scarier than it actually is.

The problem goes deeper than the deficit being a number people can point to. I'm pretty sure a significant portion of the population believes that the words "deficit", "debt" and "recession" are synonyms. Is there any polling data on how widespread this misconception is? (Apologies for the sentence-end prepositions)

Oh, I think you can certainly blame the "serious" deficit hawks for helping to create the political climate where such propaganda arguments can gain a foot-hold. The are intellectually dishonest. They've been talking-up the dangers of the deficits for decades while doing nothing to educate the public on short-term vs. long-term deficit concepts, the stagnation of middle-class incomes, the increasing volatility of careers, and the increasing spread in the distribution of wealth. Their continued support for the privatization of Social Security is an enormous clue as to just how very little they think things through. And we haven't heard a peep from them about the fact that the long-term deficits have been REDUCED, at least on paper, by Obamacare. The trend is going down, but no -- it won't work! They have a better plan! Their plan is on paper, too -- and not enacted -- but that doesn't matter!

krazen1211 - Tell it, sister. The ten-year cost of extending unemployment benefits tips the scales at $560 BILLION!!! While extending tax-cuts for the upper 2% only costs $4 trillion. That's only 8-to-1 in favor of the wealthy, not the absurd 80-to-1 number Ezra and his ilk spew mindlessly.

"krazen1211 - Tell it, sister. The ten-year cost of extending unemployment benefits tips the scales at $560 BILLION!!! While extending tax-cuts for the upper 2% only costs $4 trillion. That's only 8-to-1 in favor of the wealthy, not the absurd 80-to-1 number Ezra and his ilk spew mindlessly."

The fact that one can point to a few examples of deficit hawks joining deficit doves in calling for short-term stimulus isn't really germane.

That point is that the concern with federal deficits and debt in our public discourse is grossly disproportionate to any possible negative effects these things might have--now, or at any time in the future.

Thus the efforts of the Peterson institute to focus attention on deficits and debt levels as legitimate, indeed vital & urgent targets for economic policy, are wildly misplaced.

Such efforts merely help sustain a climate of opinion (an elite consensus) in which real problems (such as unemployment) must forever compete for attention with non-problems (such as the specter of sovereign default, or bond vigilantism, or financial crowding-out).

None of these latter are in fact real possibilities for a monetary sovereign such as the U.S., yet that simple, liberating message stands essentially zero chance of ever entering the public consciousness as long as the Peterson-funded mythos about the danger of deficits and debt continues to set the outer boundaries of legitimate macroeconomic debate.

Let's consider "frauds" by your own words Ezra -- $56 billion for unemployment "benefits." Those should actually be called unemployment "welfare" since unemployment is an "insurance" program into which money is paid, and benefits are given. When the benefits expire, welfare is all that is left.

And, the $56 billion in welfare is the cost over the next 13 months, for little or no economic gain beyond that time.

As for the $4 trillion -- well, the tax cuts don't "add" to the deficit since they take away direct revenue. If Gov't spending was aligned with revenue, there wouldn't be any deficit.

Second, the cost of the entire bill over 10 years is $858 billion according to CNN. http://money.cnn.com/2010/12/15/news/economy/tax_deal_what_is_in_bill/index.htm

The "cost" of all the tax cuts -- for 2 years -- is $210 billion. So, where you get a $4 trillion number, what bracket applies to, an for how long, are all factors you don't identify. I can only conclude that you've used this number so many times that its lost all meaning to you.

If you're not referring to the tax rate compromise, then why are you discussing both the unemployment welfare extension and the cost of tax cuts -- both part of the compromise -- in the same article?

You're analysis and thinking are always muddy -- a function of your age and lack of experience in serious policy study.

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